When lithium-ion batteries (LIB’s) first went into commercial production in the early nineties, few could have predicted how prevalent they would become in the ensuing decades. LIB’s are a type of rechargeable battery that are used in portable electronic devices such as laptops and smartphones as well as electric vehicles. Unsurprisingly, as production of these devices and cars have ramped up in recent years, the demand for the minerals used to make LIB’s (one of which is lithium) has increased exponentially.
There is a problem though: there simply isn’t enough lithium hitting the market to keep up with the current and forecasted demand. This was noticed in 2015 when fears of a supply shortage caused lithium prices to triple to over $20,000 a ton[1]. The reason for this spike was a realisation that if the electric vehicle market takes off, then there will be intense competition for this mineral between EV makers and producers of laptops and phones.
Tesla, a leading manufacturer of electric vehicles, has recently voiced concerns about the expected global shortage in battery minerals. One reason for this prediction that they voiced was an underinvestment in the mining sector[2]. And this is the key point here – it is not that there is not enough lithium (or other battery minerals) in the earth, it is that there aren’t enough mines extracting it.
Most of the world’s supply of lithium is currently coming from South America; Chile, Argentina and Bolivia are often described as the ‘Lithium Triangle’. Chile by itself has over 7.5 million metric tons by some estimates[3]. But South America is not the only continent with lithium – in fact, the American lithium industry used to be the largest in the world. According to a U.S. Geological Survey[4], the U.S. has 13% of the world’s lithium resources and given the recent trends in global trading relationships, the advantages to U.S. electronic vehicle makers of having a domestic supplier should be obvious.
This is an opportunity that Piedmont Lithium is hoping to take advantage of. Their goal is to capitalise on the impending global shortage by developing and operating lithium mines in North Carolina. The benefits of being based in this state in the U.S. cannot be understated. When you compare the costs of doing business here to other lithium-rich developed countries, North Carolina is the clear winner. Whether it’s the cost of labour, utilities or taxes, there are considerable savings to be made by operating there.
In June 2019, they announced that they had increased their lithium resources by 47% to 27.9 million tonnes. As they ramp up their operations in the next few years and secure contracts with U.S. automakers, there is incredible potential for this company and should certainly be one to add to your watchlist.
[1] Bloomberg, https://www.bloomberg.com/graphics/2017-lithium-battery-future/
[3] Engineering.com, https://www.engineering.com/AdvancedManufacturing/ArticleID/17068/Lithium-Shortage-Expected-Due-to-Lack-of-Mines.aspx
Jarryd is an experienced Investment Adviser at Emerald Financial Group
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